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Since 31st October the sale of mortgages has been overseen by the Financial Services Authority. Prior to this time, regulation was undertaken on a voluntary basis under the terms of the Mortgage Code. The Mortgage Code was a code of practice which was established by the council of Mortgage Lenders (CML) and overseen by the Mortgage Code Compliance Board.
The role of the FSA is to oversee the regulation of the financial service industry in the UK and which incorporates most of the mortgage market. The FSA and the subsequent regulation brought forward have essentially come about by the need to offer a more efficient safety net for consumers.
Anyone who wishes to sell mortgages, whether they are estate agents or mortgage brokers, must be directly authorised by the FSA or must become part of an FSA authorised network.
Under the FSA regulatory regime there is a very important distinction between information and advice sales. The sales process must distinguish between on one hand cases where advice is given; and on the other hand those where information is given and a series of pre-determined questions are used in order to act as a filter through which a client can narrow down the selection of mortgages.
If you proceed with an information only sale then you will receive solely information about that particular product or range of products – no advice or recommendation will be included. An information only sale is usually only suitable for borrowers who are certain of the type of mortgage that they require. Only individuals who proceed with an advice-based sale can seek redress through the Financial Ombudsman service.
The scheme is designed as a safety net for borrowers which aim to offer compensation when financial firms go bust. In addition borrowers will be able to take their complaint to the Financial Ombudsman Service (FOS) The Financial Services Compensation Scheme in relation to Mortgage advice and arranging will cover the following:
# Claims against firms involved in mortgage advice and arranging: 100% of the first £30,000, plus 90% of the next £20,000. (A maximum total of £48,000).
Where an advised sale takes place, it must be based not only on a consideration of which mortgage best suits the client’s needs, but also on the affordability of the scheme for that client - An increasingly important factor which must be considered in an effort to stem irresponsible lending.
At all points of regulated mortgage sale, borrowers will now receive a ‘Key Facts’ document. This summary document outlines the key features of the mortgage product which will include:
# The fees and costs associated with setting up the mortgage.
# The interest rate applicable and monthly mortgage payment amounts.
# The commission payable to the seller from the mortgage lender in the event of mortgage completion.
# The overall cost of the mortgage for every pound repaid.
# Early Repayment charges (if applicable).
# Overpayment charges (if applicable).
# Any additional features - such as a cash back special offer.
For the borrower, The Key Facts (KFI) document primarily acts a tool to compare different mortgage products on the market. It also aims to make the overall process of shopping around more transparent.
It must be understood that not all mortgage contracts are covered under the watchful eye of the Financial Services Authority. For example, Buy to let commercial mortgages are not covered unless 40% of the property (including the land) is being used as a residence by the borrower or a direct family member.
Key Changes
A "Key Facts" document summarises details and allow consumers to compare mortgages easily Price information in any advertising and marketing material must be clear Both the pros and cons of the mortgage deal must be given in any advertsWhere advice is given, firms must ensure consumers are given a "suitable" mortgage.
Both lenders and advisers have to consider whether consumers can afford the mortgage if factors, such as, interest rates changed Charges must not be excessive.
New standards are being introduced to improve the treatment of consumers with payment difficulties or facing repossessionAdvisers must undertake specialist training.
This is aimed at helping people shop around and making the process more transparent. Salesmen are required to disclose any commissions they are getting and, whether they deal with the whole market or just one lender.
At the point of all sales, consumers now receive a summary document which illustrates the key features of the mortgage, known as a "Key Facts" document. This is aimed at helping people shop around and making the process more transparent.
GMAC RFC Chelsea Building Society Firstplus Loans Endeavour Personal Finance
The role of the FSA is to oversee the regulation of the financial service industry in the UK and which incorporates most of the mortgage market. The FSA and the subsequent regulation brought forward have essentially come about by the need to offer a more efficient safety net for consumers.
Anyone who wishes to sell mortgages, whether they are estate agents or mortgage brokers, must be directly authorised by the FSA or must become part of an FSA authorised network.
Under the FSA regulatory regime there is a very important distinction between information and advice sales. The sales process must distinguish between on one hand cases where advice is given; and on the other hand those where information is given and a series of pre-determined questions are used in order to act as a filter through which a client can narrow down the selection of mortgages.
If you proceed with an information only sale then you will receive solely information about that particular product or range of products – no advice or recommendation will be included. An information only sale is usually only suitable for borrowers who are certain of the type of mortgage that they require. Only individuals who proceed with an advice-based sale can seek redress through the Financial Ombudsman service.
The scheme is designed as a safety net for borrowers which aim to offer compensation when financial firms go bust. In addition borrowers will be able to take their complaint to the Financial Ombudsman Service (FOS) The Financial Services Compensation Scheme in relation to Mortgage advice and arranging will cover the following:
# Claims against firms involved in mortgage advice and arranging: 100% of the first £30,000, plus 90% of the next £20,000. (A maximum total of £48,000).
Where an advised sale takes place, it must be based not only on a consideration of which mortgage best suits the client’s needs, but also on the affordability of the scheme for that client - An increasingly important factor which must be considered in an effort to stem irresponsible lending.
At all points of regulated mortgage sale, borrowers will now receive a ‘Key Facts’ document. This summary document outlines the key features of the mortgage product which will include:
# The fees and costs associated with setting up the mortgage.
# The interest rate applicable and monthly mortgage payment amounts.
# The commission payable to the seller from the mortgage lender in the event of mortgage completion.
# The overall cost of the mortgage for every pound repaid.
# Early Repayment charges (if applicable).
# Overpayment charges (if applicable).
# Any additional features - such as a cash back special offer.
For the borrower, The Key Facts (KFI) document primarily acts a tool to compare different mortgage products on the market. It also aims to make the overall process of shopping around more transparent.
It must be understood that not all mortgage contracts are covered under the watchful eye of the Financial Services Authority. For example, Buy to let commercial mortgages are not covered unless 40% of the property (including the land) is being used as a residence by the borrower or a direct family member.
Key Changes
A "Key Facts" document summarises details and allow consumers to compare mortgages easily Price information in any advertising and marketing material must be clear Both the pros and cons of the mortgage deal must be given in any advertsWhere advice is given, firms must ensure consumers are given a "suitable" mortgage.
Both lenders and advisers have to consider whether consumers can afford the mortgage if factors, such as, interest rates changed Charges must not be excessive.
New standards are being introduced to improve the treatment of consumers with payment difficulties or facing repossessionAdvisers must undertake specialist training.
This is aimed at helping people shop around and making the process more transparent. Salesmen are required to disclose any commissions they are getting and, whether they deal with the whole market or just one lender.
At the point of all sales, consumers now receive a summary document which illustrates the key features of the mortgage, known as a "Key Facts" document. This is aimed at helping people shop around and making the process more transparent.
GMAC RFC Chelsea Building Society Firstplus Loans Endeavour Personal Finance
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